FEATUREMaking Money as an AggregatorBy George Plosker
When confronted with the history of online, what
surprises people the most is its longevitythe
online news and magazine aggregator business has been
around for approximately 30 years. Dialog celebrated
its 30th anniversary in 2002; LexisNexis in 2003. Incredibly,
between 1971 and 1974, in addition to Dialog and LexisNexis
(then just Lexis; Nexis launched in early 1980), OCLC,
SDC ORBIT, MEDLINE, The New York Times Information
Bank, and Dow Jones News/Retrieval all began commercial
service.

The zealots who came out of this age believed that
the intelligence, energy, and alignment among these
pioneer companies and their customers increased awareness
of online access to useful electronic content, which
eventually led to the Internet and today's World Wide
Web. While this may be true, it is clear that the Web's
incredible popularity and pervasiveness has rocketed
past the traditional industry in terms of both number
of users and number of searches. Why is this so? Even
with a significant head start the traditional companies
have, at best, experienced incremental growth, while
the Web moves forward on a completely different, almost
logarithmic, scale.

Today's aggregators find themselves in a very difficult
environment. To some extent, they are stuck in the
middle between publishers that want as much revenue
as possible and a public who doesn't want to pay for
content. The most recent challenge to growth is the "Google
is good enough" phenomenon. What can the aggregator
do to begin to take back market share?

HISTORY AND MARKET POSITION

From the beginning, aggregators tended to focus on
different content areas and target markets. While there
was some overlap, and therefore competition, the services
did not parallel each other. The earliest aggregators,
Dialog and SDC ORBIT, competed in terms of being the
first "database supermarket service." Each began with
a core of scientific and government databases, later
adding business content to expand the appeal of the
service.

LexisNexis traces its heritage to the Ohio State
Bar Association (OSBA), which wanted a legal research
system for Ohio statutes. When Mead Data Central, then
the owner of Lexis, moved into the news and business
arena to start Nexis, it found a marked contrast to
the legal environment. A good portion of the legal
information was in the public domain. In contrast,
Nexis had to conduct intricate negotiations for marketing
rights to information held by a great variety of publishers,
including media giants like the Washington Post and
the New York Times. This point gets at the core of
content aggregationthe relationship between the
aggregator/search service and the publishers. Dow Jones
News/Retrieval, renamed as Dow Jones Interactive, is
now Factiva, a joint venture of two other media giants,
Dow Jones and Reuters, that own core content aggregated
by Factiva. Still, Factiva must negotiate for content
it doesn't own.

Another early search service was BRS, a major piece
of which morphed into Ovid to focus on medical and
life sciences content. A partnership among Chemical
Abstracts Service, Fachinformationszentrum Karlsruhe
(FIZ Karlsruhe) of Germany, and Japan Information Center
of Science and Technology (JICST) created STN, which
concentrates on scientific, technical, and patent literature
with some accompanying business content. Today, STN
has over 200 databases, "covering a broad range of
scientific fields, including chemistry, engineering,
life sciences, pharmaceutics, biotechnology, regulatory
compliance, patents, business, and more."

COMMONALITIES OF DEVELOPMENT

All these aggregator search services had certain
points in common. They grew out of technical environments
that, typically, were government-funded. This enabled
them to spend the large amounts of capital necessary
to create large-scale data centers. All had distinct
ideas of what market segments they would go after and
enjoyed strong growth for many years in serving those
segments, although perhaps not quite in the way they
envisioned. They had a focus on obtainingthrough
licensing, partnerships, and, in some cases, ownershipauthoritative
and compelling content. As user environments and technology
changed, these search services introduced interface
improvements and, in some instances, new services to
meet the needs of different groups of users. So, what
went wrong? Why did aggregator search services never
capture the breadth of demand they sought? Information
industry writers and pundits have typically pointed
to two key factors in terms of what inhibited the growth
of the traditional aggregatorscost and complexity.

COST AS BARRIER TO GROWTH

Historically, aggregator search service licensed
all or most of their content from outside publishers.
The publisher or content provider obtains royalty payments
from the search service depending on how often customers
use their material. In the transactional model, a search
service charges users for each document viewed and
pays the publisher each time this occurs. In the subscription
model, the aggregator sets up a defined royalty pool
derived from the total amount of subscriptions sold.
The aggregator still tracks usage and the publisher
receives a payment based on a percentage of the total
hits within its content in the royalty pool. However,
the details make the changing mechanisms of the large
aggregators frustrating for the client. First, transactional
pricing can be very complicated. Second, subscriptions
are not true flat fees.

Connect-time pricing originated with Dialog at the
very beginning of online. Early customers paid three
variables: (1) connect time, (2) record charges, and
(3) charges for the telecommunications network. Today,
Dialog has well over 500 databases. Each database has
distinct charges for connect time and records. Connect
time varies from $0.42 to $5.93 per minute. Record
charges range from $0.13 for the King James version
of the Bible, to over $200 per record for corporate
structure reports and a handbook of organic chemistry.
In one especially valuable and complex patent database,
there are 36 separate formats. Dialog charges additional
separate charges for Alerts, redistribution or archiving
fees, and powerful ranking and reporting features.

Subscription pricing from a large aggregator is a
good way for the customer to gain control and budget
predictabilityor so it would seem. This is true
for the period of the contract. As has been observed
by many practitioners and industry writers, companies
track actual (transactional) charges during the budget
period. When it comes time for renewal, the aggregator
bases the renewal on the relationship between the previous
subscription amount and the actual usage. Assume you
have a subscription contract with the aggregator for
$50,000 but you actually "use" $100,000 worth of product.
To show "goodwill," the aggregator will often "split
the difference" so that the renewal amount, in this
example, would be $75,000. That's still a hefty increase
for the customer.

PRICING MECHANISMS
LIMIT USAGE

Knowledgeable administrators are aware of this potential
discrepancy, and some attempt to limit the use of the
product during the first contract period to minimize
increases at renewal. In some cases, intermediaries
refuse to allow end users access to the product, realizing
the resulting impact on their budget. In other cases,
the administering individual or department attempts
to obtain a portion of the fees from end-user departments.
This has varying reactions depending on how valuable
the end-user department views the aggregated data.
In too many cases, a subscription contract, designed
to increase visibility, usage, and utility, has the
opposite effect when administrators refuse to promote
availability of the product to the departments that
might use it.

First-time visitors to major aggregator Web sites
are often confused when they cannot find how much the
service costs. In fact, it is actually quite difficult
for an aggregator to answer what seems like a simple
question: "How much will a subscription cost?" There
may be contract language that the first 3 months will
cost X amount and then there will be an evaluation
to determine charges for the next period.

One step forward: The "big three" now offer immediate
access to their services via online sign-up with billing
to a credit card. For example, LexisNexis offers two
credit card options for nonsubscription clients. The
first is a pay-as-you-go option. In this model, there
is no charge for searching; users only pay for the
complete text of documents viewed. Fees include $3
for newspapers, trade journals, newsletters, and wire
services. Company and financial information ranges
from $4 to $12. The second model is pay by day or week.
Costs range, based on what specific content you wish
to use. Available content categories include Newspapers,
Business and Financial databases ($75/day; $250/week),
Business Sources ($50/day; $150/week), and Major Papers
($30/day; $75/week).

Factiva offers individual subscriptions for $69/year
plus $2.95 per document. The individual subscription
also includes alert capabilities for $9.95 per Track
Folder per month. However, this subscription option
excludes select premium content, including Historical
Market Data and Quotes, Company Quick Search, Business
Newsstand, Investext, and Dun & Bradstreet.

Many potential users and observers see online connect
time as a major inhibitor to use. These same observers
comment that major aggregator fees are set up in a
way that discourages adoption and success. On the other
hand, charging mechanisms that provide searching and
browsing for free and only charge for what is actually
read are seen as much more user-friendly.

ECONOMICS OF AGGREGATION

The cost issue goes beyond perception and presentation.
It is expensive to be in the large-scale aggregator/search
service business. Aside from the issue of sharing revenues
with publishers and other content providers, as discussed
above, aggregators must have large-scale data centers,
which are expensive to maintain, especially when literally
thousands of simultaneous users are demanding instantaneous
response time.

To their credit, aggregators are continuing to experiment
with pricing in attempts to maintain existing customer
loyalty as well as to entice new users with a reasonably
priced value-proposition. According to Roy Martin Jr.,
president and CEO of Dialog in an interview with Matthew
McBride published in Searcher, May 2003, "...over
time, pricing models in the industry will continue
to evolve as customer and user requirements change.
As information
delivery continues to migrate across the enterprise, different pricing models
more attuned to this growing user groupespecially those that involve
fixed-price optionsare likely to continue to emerge. For power searchers,
who have a level of sophistication and knowledge of content and sources that
goes beyond that of most enterprise users, traditional pricing models that
emphasize and reward precision and sophistication will likely remain."

REVENUE AND PROFIT NUMBERS

The aggregator/search service business is not a small
industry. Although all the major aggregators are subsidiaries
or units of publicly traded companies, and as such
are not required to publish their revenue and profit
figures, occasionally the industry press finds useful
numbers.

For a brief period between 1997 and 2000, Dialog
was a publicly traded company, both on the London Stock
Exchange and the NASDAQ, allowing a rare glimpse into
its results. The May 1999 issue of ONLINE, quoting
a Dialog press release, showed 1998 revenues of $284.1
million and operating profit of $42.6 million. The Triangle
Business Journal, in its April 14, 2000, issue,
said that Dialog revenue for 1999 was $281.2 million.
This article also reported that the company lost $8.7
million in operating income for the year. Since many
industry observers felt that Dialog revenues were declining
at this point, it seems safe to say that prior to the
late 1990s, the company exceeded $300 million in annual
sales.

Electronic Information Report, March 25, 2002,
stated, "While Factiva, which is a subsidiary of Reuters
and Dow Jones, does not report earnings, Dow Jones
reports that Factiva generates about $250 million in
annual sales with an annual growth rate of around 5.5
percent." This is not to say that all is rosy. The
same publication on December 12, 1997, reported that
then LexisNexis president and chief executive officer,
Ira Siegel, "was forced to take an early retirement
because of the unit's poor sales, which according to
the Dayton Daily News, may decline 50 percent
by the end of the year."

COMPLEXITY AS
BARRIER TO GROWTH

The aggregators developed their systems at a time
when there was no standard for an online searching
interface. Remember, these systems developed pre-Web,
indeed, pre-personal computer and pre-Windows. Their
respective providers saw the early interfaces as a
competitive advantage. The early adopters, especially
the search intermediaries, went through the sometimes
substantial learning curve. Training, online practice,
and careful pre-search planning were all part of the
drill.

The aggregators were slow to change their systems
to adapt to changes in technologies, or to meet different
types of user needs. The complexity of the interface
became the search services' hallmark. As search became
ubiquitous, the aggregators took a somewhat predictable,
but unproductive stance. At first, they viewed the
Web as amateurish and probably (hopefully!) a flash
in the pan. They viewed open Web content as not comparable
with the content in their databases. While this is
for the most part true, the typical Web searcher did
not grasp or appreciate the significance of the difference.
Now, in their efforts to update their interfaces and
make them have more appeal, the aggregators are trying
to look like the open Webat least in terms of
interface.

Aggregators are also looking to business development
and partnerships to increase the use of their content.
The recent announcement by Microsoft that it will integrate
external content into the next generation of its Office
products brings home the importance, not only of quality
content, but also of search itself. Recently, LexisNexis
and Siebel Systems announced a joint initiative to
bring Nexis business, industry, and global news information,
at the appropriate point-of-need, to users of Siebel's
eBusiness applications.

MARKET SEGMENTATION

The choice of online distribution channels allows
publishers to focus on specific market segments, including
the corporate or consumer user, specific industries,
departments, even job titles. The 'big three" aggregators
all targeted the corporate userand all attempted
to broaden the use of their products beyond their early
core users.

However, experience and results have shown that,
to varying degrees, the major online aggregators had
difficulty moving beyond the core markets that they
worked with going back to the 1970s. The early users
of Dialog and Nexis were librarians and corporate information
specialists, rather than the broader business users
whom the aggregators desired. Of course, the early
users of Lexis were lawyers. Factiva and its earlier
Dow Jones and Reuters iterations, had strong name recognition
based on exclusive Dow Jones and Reuters content, with
both information and financial professionals. In terms
of moving beyond the information professional, Factiva,
with its Wall Street Journal coverage, certainly
has the edge in the business world

THE INFORMATION INTERMEDIARY

Initially, only information intermediaries used aggregator
systems, hence, marketing was directed at them. The
individual who actually needed the information did
not conduct the search. The information intermediary,
often a librarian or other information specialist,
conducted a detailed interview with the information
requestor. These interviews would cover the purpose
of the search, what work had already been done on the
research subject, amount of information required, due
date, nature of the content types that the "end user" was
looking for, and other details, such as the format
that would be most useful, and so on. The subject aspect
of the pre-search interview would often take the form
of a negotiation, with the discussion going back and
forth to make sure that both parties were clear on
exactly what the search topic was. Often, the intermediary
would add value in terms of clarifying the question
for the researcher, while the researcher could provide
technical terminology, synonyms, known authors, and
papers. This back and forth would then allow the intermediary
to utilize their expertise with the online system,
database selection, and choice of search strategy to
deliver a precise, comprehensive and, most importantly,
cost-
effective search.

Intermediaries viewed the complexity and cost of
these systems as inappropriate for the occasional searcher.
This viewpoint, whether perception or reality, made
it very difficult for online aggregators to grow their
business beyond the intermediary market. As time went
on, the online aggregators sought to modify both their
interfaces and their pricing policies to enable them
to penetrate an organization beyond the intermediary.

GOING BEYOND THE INFORMATION INTERMEDIARY

Sometime between the emergence of the personal computer
and the coming of the Web, the aggregators began to
experiment with pricing and simplified interfaces to
grow their markets. Commands were simplified, menus
were introduced, core searches were canned, and alert
or push services were emphasized as mechanisms to grow
the businesses. As the Internet and intranets came
into play, the search services developed tools for
integrating external content into the intranet, enabling
corporate users to locate relevant external and internal
information in one place.

The notion of integrating content into workflow became
common. In many cases, this approach has been more
successful than asking busy knowledge workers to learn
and access one system internally and another for external
content. Vendors now offer a myriad of choices to provide
content to the knowledge worker. For corporate users,
a key factor is working closely with the customer contact
team from the aggregator to make sure that the implementation
really meets the needs of the organization. Issues
like content preferences, search mechanism, depth and
breadth of search, currency, and of course, pricing,
require in-depth discussion with the vendor team. From
the seller perspective, the team must contain the content,
technical, and sales expertise to succeed in this complex
process.

CONSUMER AGGREGATORS REBORN

As the open Web has gained popularity, a new generation
of content aggregators has emerged, offering consumer-oriented
subject matter. These aggregators offer much lower
price points than the traditional aggregators and typically
target the home, not corporate, user. Interfaces reflect
users' broad familiarity with Web search; some actually
use the same search engines that deal with intranet
or Web content.

One such offering is eLibrary, a product of HighBeam
Research, a new-age vendor targeting the consumer segment.
For flat fees ranging from $19.95 per month or $99.95
per year, eLibrary clients can access "hundreds and
hundreds of full-text periodicals, newspapers, newswires,
and a collection of encyclopedias, dictionaries, almanacs,
and a thesaurus."

Another new player recently entered the consumer
content spaceKeep-Media. Louis Borders, founder
of Borders bookstores and the ill-fated WebVan, founded
KeepMedia. Working with Douglas Herrington, CEO of
KeepMedia, Borders plans to leverage his experience
with content and retail into the successful sale of
premium content to the broad consumer market. KeepMedia
launched with 140 well-known magazines and charges
$4.95 per month.

In a conversation with Herrington, he stressed that
KeepMedia sees the challenges in getting the public
attuned to purchasing content as a "retailing problem." He
wants customers to be able to easily shop and buy,
have the right merchandise and selection, and, of course,
with pricing acceptable to a broad audience. Herrington
feels that when consumers care about a content issue,
they want to deal with a vendor that provides a high "quality
threshold" somewhat similar to the Nordstrom's model.

KeepMedia started its content pool with popular,
highly regarded magazines that offer "powerful branding
and well-known, strong content." Herrington told me
that timing is everything: Publishers are looking at
this new online venture as a way to reinforce the customer
relationship and increase revenues from their archives.
Data will flow to KeepMedia after the next issue hits
the newsstand. In addition to online access, KeepMedia
will also offer a mechanism for users to subscribe
to print. Herrington feels that publishers have moved
past the point of wanting to offer content via their
own Web sites, recognizing that the cost/benefit of
doing their own sites is weak.

The KeepMedia interface does not emulate the large
search services. Rather, it supports customer browsing,
keeping-up (alerting), and research on the same platform.
KeepMedia offers a high degree of personalization that
will lead to new displays of content based on past
reading and searching behavior. Moving beyond collaborative
filtering and customer profiling (which don't work,
according to Herrington) to content profiling, KeepMedia
will utilize the latest content categorization tools
to provide a much higher level of precision and granularity
than other "more like this" tools.

Writing in the July 24, 2003, issue of The Washington
Post, Leslie Walker said, "Still, KeepMedia faces
a huge marketing challenge to line up subscribers.
Steven Brill's Contentville attempted something similar,
selling piecemeal access to magazines, books and
academic papers, before it closed for lack of readers
in 2001."

CONTENT DEFINITION AND VALUE

Here's another key price variation: One aggregator
will charge different rates for the content in different
databases, while another tends to provide one price
for virtually all articles regardless of source. Clearly,
an aggregator's approach to the business model and
its relationships with the publishers determine what
makes sense for them. However, from the customer perspective,
the difficulty of having hundreds of different prices
for output is daunting and adds to the complexity.

A potentially larger point looms in terms of the
effort to gain new users and increase revenues and
market share. The most important difference between
premium content aggregators and the open Web is the
nature of the content itself. Why is premium aggregator
content premium? What exactly makes it worth the amount
of money the aggregator is charging?

Intermediate users of these systems were sufficiently
familiar with the content and sources to understand
that a refereed article is more authoritative than
a press release; that business and popular literature
are still more carefully researched, fact-checked,
and edited than open Web sources; that patent literature
is critical when doing certain kinds of research; that
investment reports are more expensive than typical
published articles; and that sophisticated access points
and elaborate search strategies may save time even
if the system is more expensive.

The aggregators generally provide considerable documentation
and support materials, including highly detailed database
descriptions that note the nature of the content, its
creation process, typical applications, and unique
value. However, the documentation is rarely available
at the point-of-use when a novice online user is making
a buy decision. Moreover, the meter is running, which
precludes the idea of reading support materials to
determine if you want to spend your carefully budgeted
money on some particular output. The aggregators seem
to expect that the user already knows the content and
its value. While this may be true for the power user,
experience shows that this is not the case with the
much larger group of potential users. To today's Web
user, all content is equal. In order to demonstrate
higher value to a new generation of users, aggregators
need to take a new and more aggressive approach to
user education, particularly at the point of use.

SIX STEPS TO MAKING MONEY

What do aggregators need to do to make money? Here
are the key points:

 Take care of your existing customers and
leverage this base to grow use to affiliated professionals.

 Look to find ways to maintain a balance between cost and value delivered.

 Work with content suppliers to increase and define value and move to new
price points that are in everyone's best interest.

 Take the steps to make users understand how content is differentiated
and what different content types mean to them.

 Listen to your customers and give them the tools and interface features
that increase functionality and loyalty.

 Look at current Web trends and features and both take advantage and go
beyond them.

Therefore, I welcome the attempts of new aggregators
to bring news, periodical, and other premium content
to the vast numbers of people who are using the open
Web to access information. Many of those involved in
the information industry have called their products "access
to humankind's recorded knowledge." I cannot help but
agree that broadening this access is a good thing.

George Plosker[gplosker@comcast.net] is
principal of George Plosker & Associates, a customer-centric
consulting firm based in San Carlos, California.